Scottish Independence

I'm currently trying to work out if this article is a satire that I don't 'get' or a breathtaking inane waste of space in the Telegraph's Comment section that could have been better used. Still, the fate of the Union is a topic worth returning to.

I'll go over the politics and then the issues - the money and the intangible benefits Scotland takes from the Union.

The politics

The SNP are playing an absolute blinder. Some promises such as subsidising first time buyers and paying off student debt have been abandoned but between freezing council tax and boosting police numbers they've got two tangible and very popular measures in place. Not bad for a minority administration in relatively tough times.

The Scottish Tories are doing alright as well, they handled the budget effectively, but they're a bit player in a fight between the SNP and Scottish Labour in a country with little appetite for Conservative leadership. The Labourites are losing that fight so badly it is embarassing.

In that context, Wendy Alexander's call for a Scottish independence referendum now makes some sense. She shifts the question from "would you rather have the SNP or Labour governing Scotland" to "do you want Scotland to become independent. The Union is currently a lot more popular than Labour so shifting the question in that way could improve her position. While it is always possible that Scottish Labour could screw up a Unionist campaign so badly the Nats win it might well be a risk worth taking to fight an independence referendum now rather than a few years down the line with a Tory government at Westminster and the SNP even more popular.

The money

I don't think the money is as big a deal as people make out.

From the English perspective, the pattern of regional fiscal transfers wouldn't change much if Scotland dissapeared. At the moment the Greater South East sends about 8 per cent of its regional GVA to the rest of the country. Everyone else, to a greater or lesser extent, comes out better off.

If Scotland were removed from the picture then there would be a bit more money to either leave with the South or slosh around the other regions but, in the grand scheme of things, not much would change. Things could even get worse if the Scottish subsidy was simply reallocated to the North of England and increased the extent of all the problems that an excessively large state already creates for the Northern private sector. There are only two ways of significantly reducing harmful (PDF, pages 9-25) regional dependency:

1) The wrong way - start winning seats as the Southern League (you would do ten times as well as the UKIP et. al.).

2) The right way - shrink and decentralise the state.

From the Scottish perspective the money is rather more important fiscally. Even if Scotland takes 90 per cent of North Sea oil revenues (as they probably would) they'll lose around 2.4 per cent of their GVA with independence. That's a lot of money and, combined with transition costs building a new state, will mean the Scots are seriously worse off in the years following independence.

However, that isn't the end of the story. When the Scots try to recover their economic position it seems entirely probable that the first country they'll look to learn from is Ireland. It is the obvious parallel as a former component of the United Kingdom and has been astonishingly successful. As Matthew Elliott, TPA Chief Executive, noted in his opinion piece for City Am yesterday:

"In 1993 Ireland was significantly poorer than the United Kingdom, with income per capita 28% higher in the UK. Its economy then took off, with average real terms economic growth between 1994 and 2006 of 7.4%. In contrast, the UK managed just 2.9% real terms growth in the same period. Today the Irish enjoy income per capita 20% higher than we do in the UK."

If the Scots can replicate that they won't be shedding too many tears over their lost Southern subsidy. In the end, the best way for a region to get rich isn't, thankfully, to try and extract a subsidy from wealthier regions. As an article by Benjamin Powell for the Cato Institute establishes, EU subsidies did little for Irish economic growth. As a result, I don't think the Scots should want to stay a part of the UK just so that they can hold onto subsidies from the South.

It is unfortunate and innapropriate that a debate that should be about national destiny is, so often, fought over the fools gold of state subsidy.

The intangibles

As I've set out before, I think that conservatives should be sad at the passing of a state with the history of the United Kingdom and sceptical that we can do better replacing it with something new.

However, I think it is the Scots, in particular, who would lose out from the United Kingdom being broken up. They would lose a grand stage. At the moment an ambitious Scot (and they're not all dismal Scottish Labour politicians) in business, politics or the arts has a domestic "market" that includes a population of 60 million and an international centre in London. Scottish Independence would make all that "abroad". The intangible, psychological effect would, I think, do damage to the ambition and prospects for greatness of all Scots.

Would Adam Smith have left the same legacy to history if he had not lived in the same country as the government of a great empire that could promote or enforce free trade, in particular, around the world?

So many talented Scots head South to make their mark. Any list of Scottish people who have gone on to great things would, I think, find few of them living in Scotland. That process isn't an accident. It is, I think, pretty common for small communities that their best and brightest must go elsewhere to explore their full potential. The same is true of small towns in the South East - people move to London to make it big. It only becomes a 'loss' to the Scottish nation with independence - when someone moving to London is moving abroad.